VeriSign, Inc. (NASDAQ: VRSN), a global provider of domain name
registry services and internet infrastructure, today reported
financial results for the second quarter of 2019.
Second Quarter GAAP Financial Results
VeriSign, Inc. and its subsidiaries (“Verisign”) reported
revenue of $306 million for the second quarter of 2019, up 1.3
percent from the same quarter in 2018. Verisign reported net income
of $148 million and diluted earnings per share (diluted “EPS”) of
$1.24 for the second quarter of 2019, compared to net income of
$128 million and diluted EPS of $1.04 for the same quarter in 2018.
The operating margin was 65.9 percent for the second quarter of
2019 compared to 63.8 percent for the same quarter in 2018.
Second Quarter Non-GAAP Financial Results
Verisign reported, on a non-GAAP basis, net income of $159
million and diluted EPS of $1.33 for the second quarter of 2019,
compared to net income of $145 million and diluted EPS of $1.18 for
the same quarter in 2018. The non-GAAP operating margin was 70.1
percent for the second quarter of 2019 compared to 68.2 percent for
the same quarter in 2018. A table reconciling the GAAP to the
non-GAAP results (which excludes the items described under
“Non-GAAP Financial Measures and Adjusted EBITDA” below) is
appended to this news release.
“Our results demonstrate another solid quarter of focused
execution,” said Jim Bidzos, Executive Chairman, President and
Chief Executive Officer.
Financial Highlights
- Verisign ended the second quarter of 2019 with cash, cash
equivalents and marketable securities of $1.22 billion, a decrease
of $45 million from the end of 2018.
- Cash flow from operating activities was $165 million for the
second quarter of 2019, compared to $202 million for the same
quarter in 2018.
- Deferred revenues as of June 30, 2019 totaled $1.05 billion, an
increase of $32 million from the end of 2018.
- During the second quarter of 2019, Verisign repurchased 0.9
million shares of its common stock for an aggregate cost of $175
million. As of June 30, 2019, there was $716 million remaining for
future share repurchases under the share repurchase program which
has no expiration date.
Business Highlights
- Verisign ended the second quarter of 2019 with 156.1 million
.com and .net domain name registrations in the domain name base, a
4.3 percent increase from the end of the second quarter of 2018,
and a net increase of 1.34 million during the second quarter of
2019.
- During the second quarter of 2019, Verisign processed 10.3
million new domain name registrations for .com and .net, compared
to 9.6 million for the same quarter in 2018.
- The final .com and .net renewal rate for the first quarter of
2019 was 75.0 percent compared with 75.3 percent for the same
quarter in 2018. Renewal rates are not fully measurable until 45
days after the end of the quarter.
Non-GAAP Financial Measures and
Adjusted EBITDA
Verisign provides quarterly and annual financial statements that
are prepared in accordance with generally accepted accounting
principles (GAAP). Along with this information, management
typically discloses and discusses certain non-GAAP financial
measures in quarterly earnings news releases, on investor
conference calls and during investor conferences and related
events. These non-GAAP financial measures do not include the
following items that are included in the comparable GAAP financial
measures: stock-based compensation, non-cash interest expense
through June 30, 2018, and loss on debt extinguishment. Non-GAAP
net income is adjusted for an income tax rate of 22 percent which
differs from the GAAP income tax rate.
On a quarterly basis, Verisign also provides Adjusted EBITDA.
Adjusted EBITDA is a non-GAAP financial measure and is calculated
in accordance with the terms of the indentures governing Verisign’s
senior notes. Adjusted EBITDA refers to net income before interest,
taxes, depreciation and amortization, stock-based compensation,
unrealized gain / loss on hedging agreements, and gain on the sale
of a business.
Management believes that these non-GAAP financial measures
supplement the GAAP financial measures by providing investors with
additional information that allows them to have a clearer picture
of Verisign’s operations and financial performance and the
comparability of Verisign’s operating results from period to
period. The presentation of these non-GAAP financial measures is
not meant to be considered in isolation nor as a substitute for
financial measures prepared in accordance with GAAP.
The tables appended to this release include a reconciliation of
the non-GAAP financial measures to the comparable financial
measures reported in accordance with GAAP for the given
periods.
Today’s Conference Call
Verisign will host a live conference call today at 4:30 p.m.
(EDT) to review the second quarter 2019 results. The call will be
accessible by direct dial at (888) 676-VRSN (U.S.) or (786)
789-4776 (international), conference ID: Verisign. A listen-only
live web cast of the conference call and accompanying slide
presentation will also be available at
https://investor.Verisign.com. An audio archive of the call will be
available at https://investor.Verisign.com/events.cfm. This news
release and the financial information discussed on today’s
conference call are available at https://investor.Verisign.com.
About Verisign
Verisign, a global provider of domain name registry services and
internet infrastructure, enables internet navigation for many of
the world’s most recognized domain names. Verisign enables the
security, stability and resiliency of key internet infrastructure
and services, including providing root zone maintainer services,
operating two of the 13 global internet root servers, and providing
registration services and authoritative resolution for the .com and
.net top-level domains, which support the majority of global
e-commerce. To learn more about what it means to be Powered by
Verisign, please visit Verisign.com.
VRSNF
Statements in this announcement other than historical data and
information constitute forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 as amended and
Section 21E of the Securities Exchange Act of 1934 as amended.
These statements involve risks and uncertainties that could cause
our actual results to differ materially from those stated or
implied by such forward-looking statements. The potential risks and
uncertainties include, among others, risks arising from the
agreements governing our Registry Services business; new or
existing governmental laws and regulations in the U.S. or other
applicable foreign jurisdictions; system interruptions, security
breaches, attacks on the internet by hackers, viruses, or
intentional acts of vandalism; the uncertainty of the impact of
changes to the multi-stakeholder model of internet governance;
risks arising from our operation of two root zone servers and our
performance of the Root Zone Maintainer functions; changes in
internet practices and behavior and the adoption of substitute
technologies; the success or failure of the evolution of our
markets; the highly competitive business environment in which we
operate; whether we can maintain strong relationships with
registrars and their resellers to maintain their marketing focus on
our products and services; the possibility of system interruptions
or failures; challenging global economic conditions; economic,
legal and political risk associated with our international
operations; our ability to protect and enforce our rights to our
intellectual property and ensure that we do not infringe on others’
intellectual property; the outcome of legal or other challenges
resulting from our activities or the activities of registrars or
registrants, or litigation generally; the impact of our new
strategic initiatives, including our IDN gTLDs; whether we can
retain and motivate our senior management and key employees; and
the impact of unfavorable tax rules and regulations. More
information about potential factors that could affect our business
and financial results is included in our filings with the SEC,
including in our Annual Report on Form 10-K for the year ended Dec.
31, 2018, Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K. Verisign undertakes no obligation to update any of the
forward-looking statements after the date of this announcement.
©2019 VeriSign, Inc. All rights reserved. VERISIGN, the VERISIGN
logo, and other trademarks, service marks, and designs are
registered or unregistered trademarks of VeriSign, Inc. and its
subsidiaries in the United States and in foreign countries. All
other trademarks are property of their respective owners.
VERISIGN, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except par
value)
(Unaudited)
June 30, 2019
December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents
$
751,580
$
357,415
Marketable securities
473,362
912,254
Other current assets
70,440
47,365
Total current assets
1,295,382
1,317,034
Property and equipment, net
250,820
253,905
Goodwill
52,527
52,527
Deferred tax assets
109,917
104,992
Deposits to acquire intangible assets
145,000
145,000
Other long-term assets
36,252
41,046
Total long-term assets
594,516
597,470
Total assets
$
1,889,898
$
1,914,504
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued
liabilities
$
171,215
$
215,208
Deferred revenues
763,466
732,382
Total current liabilities
934,681
947,590
Long-term deferred revenues
286,143
285,720
Senior notes
1,786,306
1,785,047
Long-term tax and other liabilities
307,935
281,621
Total long-term liabilities
2,380,384
2,352,388
Total liabilities
3,315,065
3,299,978
Commitments and contingencies
Stockholders’ deficit:
Preferred stock—par value $.001 per share;
Authorized shares: 5,000; Issued and outstanding shares: none
—
—
Common stock—par value $.001 per share;
Authorized shares: 1,000,000; Issued shares: 352,952 at June 30,
2019 and 352,325 at December 31, 2018; Outstanding shares: 118,548
at June 30, 2019 and 120,037 at December 31, 2018
353
352
Additional paid-in capital
15,356,935
15,706,774
Accumulated deficit
(16,779,728
)
(17,089,789
)
Accumulated other comprehensive loss
(2,727
)
(2,811
)
Total stockholders’ deficit
(1,425,167
)
(1,385,474
)
Total liabilities and stockholders’
deficit
$
1,889,898
$
1,914,504
VERISIGN, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except per
share data)
(Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Revenues
$
306,289
$
302,452
$
612,697
$
601,740
Costs and expenses:
Cost of revenues
44,066
47,365
89,570
95,517
Sales and marketing
12,399
16,569
22,918
33,844
Research and development
14,953
13,755
31,085
29,130
General and administrative
33,178
31,753
67,179
64,820
Total costs and expenses
104,596
109,442
210,752
223,311
Operating income
201,693
193,010
401,945
378,429
Interest expense
(22,635
)
(28,792
)
(45,266
)
(69,580
)
Non-operating income, net
11,436
660
23,639
8,464
Income before income taxes
190,494
164,878
380,318
317,313
Income tax expense
(42,960
)
(36,527
)
(70,257
)
(54,699
)
Net income
147,534
128,351
310,061
262,614
Other comprehensive income
35
17
84
260
Comprehensive income
$
147,569
$
128,368
$
310,145
$
262,874
Earnings per share:
Basic
$
1.24
$
1.13
$
2.60
$
2.49
Diluted
$
1.24
$
1.04
$
2.59
$
2.13
Shares used to compute earnings per
share
Basic
118,965
113,936
119,359
105,639
Diluted
119,361
123,200
119,837
123,399
VERISIGN, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June
30,
2019
2018
Cash flows from operating activities:
Net income
$
310,061
$
262,614
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of property and equipment
22,884
24,195
Stock-based compensation
25,617
26,276
Amortization of discount on investments in
debt securities
(5,679
)
(7,686
)
Other, net
894
13,452
Changes in operating assets and
liabilities:
Other assets
(10,254
)
(7,605
)
Accounts payable and accrued
liabilities
(39,351
)
(20,892
)
Deferred revenues
31,857
27,296
Net deferred income taxes and other
long-term tax liabilities
16,146
(25,844
)
Net cash provided by operating
activities
352,175
291,806
Cash flows from investing activities:
Proceeds from maturities and sales of
marketable securities
1,466,303
2,634,376
Purchases of marketable securities
(1,021,741
)
(1,592,403
)
Purchases of property and equipment
(20,189
)
(18,669
)
Other investing activities
(6,311
)
(160
)
Net cash provided by investing
activities
418,062
1,023,144
Cash flows from financing activities:
Repayment of principal on subordinated
convertible debentures
—
(1,250,009
)
Proceeds from employee stock purchase
plan
8,253
7,811
Repurchases of common stock
(384,532
)
(281,597
)
Net cash used in financing activities
(376,279
)
(1,523,795
)
Effect of exchange rate changes on cash,
cash equivalents, and restricted cash
243
(590
)
Net increase (decrease) in cash, cash
equivalents, and restricted cash
394,201
(209,435
)
Cash, cash equivalents, and restricted
cash at beginning of period
366,753
475,139
Cash, cash equivalents, and restricted
cash at end of period
$
760,954
$
265,704
Supplemental cash flow disclosures:
Cash paid for interest
$
43,708
$
73,971
Cash paid for income taxes, net of refunds
received
$
62,214
$
85,597
VERISIGN, INC.
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES AND ADJUSTED EBITDA
(In thousands, except per
share data)
(Unaudited)
Three Months Ended June
30,
2019
2018
Operating
Income
Net Income
Operating
Income
Net Income
GAAP as reported
$
201,693
$
147,534
$
193,010
$
128,351
Adjustments:
Stock-based compensation
13,155
13,155
13,298
13,298
Non-cash interest expense
—
1,801
Loss on debt extinguishment
—
6,554
Tax adjustment
(1,843
)
(4,510
)
Non-GAAP
$
214,848
$
158,846
$
206,308
$
145,494
Revenues
$
306,289
$
302,452
Non-GAAP operating margin
70.1
%
68.2
%
Diluted shares
119,361
123,200
Diluted EPS, non-GAAP
$
1.33
$
1.18
The following table presents the
classification of stock-based compensation:
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Cost of revenues
$
1,741
$
1,818
$
3,339
$
3,428
Sales and marketing
1,019
1,494
2,002
2,942
Research and development
1,642
1,688
3,231
3,409
General and administrative
8,753
8,298
17,045
16,497
Total stock-based compensation expense
$
13,155
$
13,298
$
25,617
$
26,276
The following table reconciles GAAP net
income to non-GAAP Adjusted EBITDA:
Four Quarters Ended June 30,
2019
Net Income
$
629,936
Interest expense
90,532
Income tax expense
162,585
Depreciation and amortization
47,057
Stock-based compensation
51,845
Unrealized loss on hedging agreements
307
Gain on sale of business
(55,593
)
Non-GAAP Adjusted EBITDA
$
926,669
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190725005657/en/
Investor Relations: David Atchley,
datchley@verisign.com, 703-948-4643 Media Relations:
Deana Alvy, dalvy@verisign.com, 703-948-3800
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